March 30, 2012

In case you missed it, because Western media has ignored it, five major countries and trading partners have created a new reserve currency fund which they will use to trade among themselves. gg is sure they will trade in the world currency market as well, to help fight against the effect of the USdollar’s inflation on their markets. (Especially oil, gg is sure.)

This is big…click here. Although this fund may be small right now, its mere existence sends a very poignant message to the West. We don’t like your reindeer games, and we are going to start our own over here.

Emphasis groovygirl’s:

The BRICS – Brazil, Russia, India, China and South Africa – have agreed to provide credit to each other in local currencies. Officials say the deal will facilitate economic growth in times of crisis.

­The currency swap deal is aimed at promoting trade and investment in local currencies as well as to cut transaction costs. It’s also seen as a step to replace the dollar as a reserve currency in trade between BRICS.

“The idea is in line with many interests and economic exigencies in the world economy,” Yaroslav Lissovolik, the chief economist at Deutsche Bank told RT. “The euro and dollar are no longer seen as unquestionable monopolies in the role of reserve currencies. Clearly the world needs more reserve currencies.”

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The BRICS countries are also going to announce plans on a joint development bank which is considered a possible rival to the World Bank and the IMF. If established, it would function as a lending agency and would provide finance for joint BRICS projects.

Side musing: did you notice BRIC’s countries just changed to BRICS’s countries?

There is a global currency war going on right now and no media outlet is covering it. Even if, the West somehow influences this new entity at some point, its existence forces USdollars and Euros out of the global financial system. The dollars have to go somewhere. First, they will plug debt and raise prices, as the Fed’s QE has been doing, but then, what damage will the extra dollars do on the national level? How will the Fed drain all the extra dollars before they do damage? Only one main way….higher interest rates.

Martin Armstrong spoke of a long-term cycle for global weather, but groovygirl hasn’t come across it. She did come across this chart of average global temperatures from 2500 BC to present.

GG thinks this might be helpful for predicting long-term weather cycles. It seems to be predicting a cold cycle to 2019 and then a hot/dry cycle thru 2038. So, if you plan to garden long-term, expect a large water bill or you may want to invest in a rainwater or greywater irrigation system.

Now remember, this link is charting average global temperatures. It is not charting the regular short-term cycles within those periods of La Nina and El Nino, but over all global temps can affect the intensity of the Nina and Nino. Which can effect how dry one place is compared to another or when, in a season, it chooses to rain. The timing of rain, even when it is not that much, is the key to productive agricultural crops.

This chart may also influence global food prices, global water availability, and bug problems, which spread disease to humans, animals, and destroy plants. It seems the water fight in the Southwest US will continue along with possible dust-bowl storms.

But groovygirl, not being a weather girl, is having a hard time reconciling the above link to this chart below……

This link shows the changes in hardiness zones (based on first and last frosts of the planting season) in the US from 1990 to 2006 and may influence what crops will be best to plant in your area. Clearly, we are in a warming pattern, as zones have shifted about 200 miles north in the last 20 years. Groovygirl’s gardening journals can attest to this. The highest temps have not been higher than normal and the lowest temps have not been lower, but the last frost comes earlier and the first frost comes later, and it is definitely drier the last 4 years.

Part one. There was the conscious transferring of customer assets to meet a margin call by JP Morgan in London in what was intended to be an ‘over the weekend’ transaction with the funds replaced on Monday. Edith O’Brien is at the center of this, although it is almost inconceivable that she acted alone.

Part two. In part the failure of MF Global was caused by the refusal of certain parties to honor requests for wire transfers of legitimate funds. These parties almost certainly had insider knowledge of MF Global’s finances, and may have even had a financial interest in MF Global’s failure.

Part three. In hiding funds seized at the last hour from MF Global, and using influence to steer the bankruptcy to Chapter 11 versus the much more appropriate Chapter 7, certain parties, which may include some regulators most likely at the SEC and CFTC, and the hiding of the funds from investigators and the customers, it is quite possible that there was a conspiracy to obstruct justice.

And as in all scandals such as this, it is the obstruction of justice that can become the real giant killer in covering up ‘a third rate burglary.’

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From my perspective, MF Global is a symptom of what is wrong with the system in addition to being a shocking injustice. It has all the elements of a system gone wrong. White collar criminality, privileged elites, the double standard of law, secretive proceedings, craven media, posturing Congressmen, non-involved Justice Department, seizure of private property, compromised regulators, and a culture of fraud and deceit that serves the monied interests above all else, above oaths and honor. The sign on the entrance to the Anglo-American financial system should read, ‘Abandon all hope. ye who enter here.’

FASB wants to change the accounting rules that allowed MF Global to hide their true exposure. GG sure hopes this is just for a public relations show. Because, all financial houses use repo to maturity. There would be no market left, it would blow up. Balance sheets would be a mess.

No, no, gg knows what will happen: the big five will be exempted and all the small fries will be forced out of the market. Rules in place, systemic collapse…still a problem.

There is no solution to the huge derivative problem. They will blow up. The only question is when, and how much of it can the banks unload on sovereign funds and taxpayers before it finally happens.

MF Global was financing its European sovereign debt bets through “repo-to-maturity” transactions, which allowed it to move the exposure off its balance sheet, even though the firm still faced enormous risk in the case of a default.

FINRA and the SEC ultimately forced MF Global to increase its capital. The firm later disclosed the capital infusion in September.

Since then, lawmakers and regulators have raised questions about whether the accounting treatment used by MF Global for its repo-to-maturity transactions is appropriate, or whether it may have hindered regulators from catching problems sooner.

“That is a loophole so big you could drive a Mack Truck through it,” Democratic Senator Kent Conrad told Schapiro during a hearing in December. “If that’s not closed down, we really got to ask ourselves what we’re doing.”

Even if you close the loophole on future transactions, you can not apply it to past transactions without blowing up the whole system. New debt, that depends on very interesting loopholes in accounting rules, is the only thing keeping this thing from going down. There is no solution. The option is controlled or uncontrolled and groovygirl is not even sure that is possible with different global entities and countries trying to solve their local problems first in spite of the global waves.